Estate Planning
Estate planning is an important part of ensuring your financial future. Help protect your estate that your assets are distributed according to your wishes.
What is Estate Planning?
When you die or can no longer function rationally what will become of your assets? Who or what will get those assets? That is what an estate planning does. It is the process of designating who or what will take possession your assets when you pass away or are incapacitated.
How do you develop an estate plan? Your financial planner in conjunction with an attorney is the most commonly used team to help you set up your estate plan. This plan will help you help assure that your assets are distributed as you (not a court or some disinterested party) desire and in a tax efficient manner.
This is what we do and we do it well.
Getting Started
The first step to developing your estate plan is to define the details of your estate i.e. make an inventory. No matter what you “think” you have in your estate making a list of your assets will be important for your distribution decisions and for your advisors – financial planner, attorney, tax specialist.
Tangible assets in an estate may include:
- Homes, land or other real estate
- Vehicles including cars, motorcycles or boats
- Collectibles such as coins, art, antiques or trading cards
- Other personal possessions
Intangible assets in an estate may include:
- Checking and savings accounts and certificates of deposit
- Stocks, bonds and mutual funds.
- Life insurance policies.
- Retirement plans such as workplace 401(k) plans and individual retirement accounts
- Health savings accounts
- Ownership in a business
Also, compile a list of your current liabilities
- Mortgages
- Lines of credit
- Other current debt
- Other personal possessions
Next, define your family’s needs in your absence and how to provide for those needs.
- Do you have a will? Wills can be compiled by an attorney and/or on the internet.
- Do you have enough life insurance to protect your family from loss of your income, education costs, care for dependent children, etc. Lof Advisors’ retirement analysis will help you determine your all insurance needs including long term care and disability insurance.
- Name a guardian for your children — and a backup guardian, just in case — when you write your will.
Now that you understand your assets and liabilities and your family’s needs upon your death you are ready to start to compile your estate plan. Depending on the complexity of your estate you may want to obtain additional help. Lof Advisors will help you make that decision.
The following is a list of important legal directives that you will want to consider having in your plan.
A Trust
A trust might be appropriate. With a revocable living trust you put your assets into a
trust and select a trustee to manage the assets for your benefit (and that of your
beneficiaries). If you become ill or incapacitated, your selected trustee can take
over. Upon your death, the trust assets transfer to your designated beneficiaries,
bypassing probate, which is the court process that may otherwise distribute your
property. There is also the option to set up an irrevocable living trust which can’t be
changed or revoked by the creator.
A Medical Care Directive
A medical care directive, also known as a living will, spells out your wishes for medical care if you become unable to make those decisions yourself. You can also give a trusted person medical power of attorney for your health care giving that person the authority to make decisions if you cannot. These two documents are sometimes combined into one, known as an advanced healthcare directive.
A Durable Financial Power of Attorney
A durable financial power of attorney allows someone else to manage your financial affairs if you are medically unable to do so. Your designated agent, as directed in the document, can act on your behalf in legal and financial situations when you cannot. This includes paying your bills and taxes, as well as accessing and managing your assets.
A Limited Power of Attorney
A limited power of attorney can be useful if the idea of turning over everything to someone else concerns you. This legal document does just what its name says: It
imposes limits on the powers of your named representative. For example, you could grant the person the power to sign the documents on your behalf at the closing of a home sale or to sell a specific stock.
Important: Use caution about who has your power of attorney. They may literally have your financial well-being — and even your life — in their hands. You might want to assign the medical and financial representation to different people, as well as a backup for
each in case your primary choice is unavailable when needed.
Reviewing Beneficiaries
It is also important to review the beneficiaries on your insurance and retirement contracts.
Lof Advisors will coordinate this review with you.
The beneficiary review consists of:
- Ensuring that all contracts have a named beneficiary in order to avoid probate of that asset upon your death
- Ensuring beneficiaries are consistent with your desires
- Ensuring beneficiary contact information is current
- Ensuring you have designated contingent beneficiaries to receive your assets if the primary beneficiary dies before you die
Taxes
While one of the reasons to plan for your estate is to maximize its tax efficiency by minimizing estate and inheritance taxes, most people will not pay those taxes.
At the federal level, only very large estates are subject to estate taxes. The federal estate tax ranges from rates of 18% to 40% and generally only applies to assets over $12.92 million in 2023. If your estate exceeds that amount you may want to obtain the services of an estate tax professional to help you minimize the amount of
taxes your heirs will have to pay.
Be aware that some states have estate taxes and/or inheritance taxes. Your financial professional and tax advisor will help you with these state taxes.
Finally, plan to regularly revisit your estate plan. This will be part of your annual review at Lof Advisors.
Get In touch
(520) 881-2523
available from 8:00 – 5:00
Address 4757 East Camp Lowell Drive Tucson, AZ 85712
